In face of COVID-19, AT&T lines up $5.5B loan and touts supply chain

In order to weather the effects of the coronavirus pandemic, AT&T secures $5.5 billion in loans. (Pixabay)

AT&T took a few measures on Tuesday to assure customers and investors that all was relatively well in the face of the coronavirus pandemic. The telco announced it has struck a deal for a $5.5 billion term loan agreement with 12 banks, and that its supply chain was in good order.

"Over the past several years, the company has worked with its suppliers to ensure a geographically diverse supply chain to reduce risk in these types of situations," AT&T said in Tuesday's press release. "While the COVID-19 pandemic is subject to rapid change, in general, the company believes its exposure to near-term equipment shortages is limited."

The term-loans give AT&T added flexibility going forward, and are pre-payable without penalty. The new loan added to AT&T’s debt burden of $163 billion, which was mainly due to its purchase of DirecTV in 2015 and Time Warner, which has been renamed as WarnerMedia, in 2018.

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As of Dec. 31, AT&T has about $12 billion in cash on hand. In its update today, AT&T also vowed to continue to pay out dividends as it has done over the past 36 years. In March, AT&T filed an SEC statement saying it was canceling its accelerated share repurchase agreement with Morgan Stanley to repurchase $4 billion worth of shares during Q2, which would have been an additional source of funding.

AT&T also said its pension fund was in good order and that it doesn’t expect any cash funding requirements in the near term.

In addition, AT&T said it would get about $2 billion from the expected closing later this year of the previously announced sale of its Central European Media Enterprises Ltd. (CME) assets, as well as incoming revenue from the sale of real estate and towers.

Overall, AT&T said it had "a strong cash position, including a strong balance sheet and attractive liquidity."

While most of AT&T's financial update painted a rosy picture during the coronavirus pandemic, it did seem to indicate that layoffs could be forthcoming due to "sizing our operations."

"The strength and relevance of our core subscription businesses, our continued execution on our business transformation initiatives, and sizing our operations to economic activity will provide cash from operations that will support network investments, dividend payments and debt retirement, as well as the ability to invest in business opportunities that arise as the economies recover."

In January, AT&T cut its workforce by 4,040 jobs in the fourth quarter, according to a press release by the Communications Workers of America (CWA.) In addition to the 4,040 job cuts in the fourth quarter, the CWA said in its press release that AT&T had cut a total 37,818 jobs since the Tax Cuts and Jobs Act was passed near the end of 2017. AT&T CEO Randall Stephenson was a proponent of the tax cut, and said it would lead to the creation of at least 7,000 jobs.

Last year, AT&T cut 1,800 jobs across 24 states in its wireline division ahead of a slowdown in its fiber deployments that were one of the conditions of its deal to buy DirecTV. AT&T's embrace of software-defined networking has also led to layoffs. Earlier this year, Axios reported that thousands of AT&T workers would lose their jobs due to outsourcing overseas.